Business Law: What’s Happening?

The only thing flowing faster at business than stimulus dollars nowadays is red tape. One regulation says you can’t ask an employee about his Christmas plans. The contractors you’ve had for years must now prove they are not employees. And the Human Resources and Management Association of Princeton thinks you probably have not even heard the rest.

For that reason HRMA is presenting its annual “Hot Topics in Employment Law” on Thursday, November 19, at 9 a.m. at the New Jersey Hospital Association Conference Center on Alexander Road. Cost: $30. Visit www.hrma-nj.org.

Speakers Michael Canavan, employment specialist attorney with Pepper Hamilton, and Steven Berlin, partner with Martin, Clearwater & Bell, will discuss current and pending state and federal legislation that affects business of all sizes.

An example of a true split career, Canavan earned bachelors’ degrees in psychology and economics from Rutgers in 1987. “And, yes, I use both of them, every day,” the Middlesex Borough native says. Starting first in the financial realm, Canavan joined Goldman Sachs in New York for two years. For the following five years he counseled adults and teens stricken with mental illness at several centers in the state.

Taking his legal degree from the University of Maine, Canavan returned to New Jersey, where he became a commercial litigator for, among other firms, Pepper Hamilton. He then was recruited as in-house counsel by Elementis Specialties, a wholesale chemical distributor in Hightstown. Returning to Pepper Hamilton in 2006, Canavan is the firm’s specialist in employment law.

Canavan reminds business owners that ours is a nation operating on precedent law. “It’s not just the direct legislature of which you must be informed, but the various court decisions affecting your business. They will govern the outcomes of all future suits and judgments you might incur.”

He offers a few caveats, and the lessons of each.

Promotions testing. Like most cases that reached the federal level, the complaint began years before. In 2003 the New Haven, Connecticut, Fire Department administered written and oral examinations for promotion to open positions of lieutenant and captain.

When only two Hispanics and no African-Americans in a field of 118 applicants qualified for promotions, the city withdrew the test.

Veteran, decorated, and white firefighter Frank Ricci, who had qualified, sued and eventually triumphed in the U.S. Supreme Court decision of Ricci vs. DeStefano.

The case received especially high publicity since it came just as President Obama was proposing Judge Sonia Sotomayor for the Supreme Court. Sotomayor, who is Hispanic, rejected the firefighter’s claim.

The result of this ruling will fall hard on unthinking employers for years to come. Ricci’s victorious suit points to the obvious lesson that employers cannot configure a test to be a tool for an ulterior agenda. “Any job test needs to have neutral criteria,” says Canavan, “and test only those most valuable assets of the job.” After all, isn’t that what the business owner should be primarily seeking?

Statuteless discrimination. Nicknamed the Lilly Ledbetter Act, President Obama’s very first bill signed into law ended the statute of limitations on unequal pay policies. Lilly Ledbetter had worked alongside male counterparts at Goodyear’s Alabama plant, sharing in their tasks, but not sharing in their level of remuneration. During her 20-year career, it is calculated she received nearly $200,000 less in salary and benefits.

The court decision affirmed that such discrimination is illegal and that there is no time limit for reporting the unfair payment because each new paycheck is a fresh discrimination. The Lily Ledbetter Act makes such discrimination punishable and very costly.

“The lesson here,” says Canavan, “is for business owners to take a hard look at their pay scale.” Differing rank does not necessarily make differing pay defensible because ranks are merely labels. Neither does two workers being of the same gender, age, and race provide employers with a litigation shield. Canavan calls for an active stance whereby each differing pay scale is defined and made defensible in writing before any suit or complaint occurs.

Family Leave Act changes. A new wrinkle is under consideration. When Governor Corzine signed New Jersey’s Paid Family Leave Act into law in 2008 it gave qualifying workers six weeks paid time off to care for newborns, adopted children, and critically ill family members. Presently, 100 percent of this is funded by a payroll deduction tax, and handled by the existing state agencies that administer short-term disability payments.

Now a new law being considered in the House of Representatives would demand employers cover some of the paid leave costs. If passed, says Canavan, “this could affect New Jersey’s system by making us adopt a similar payment method, and having a larger, more expensive federal bureau administer it.”

Wage slave or contractor? Is this worker an employee or independent contractor? Both state and federal Departments of Labor and their IRS have taken an increasingly keen interest in this debate. If he looks like a salaried employee, does the same tasks as other salaried employees, then, says the DOL, he must receive benefits like a regular employee. The IRS agrees, and in its own gentle way insists that social security, Medicare, and other deductions be forthcoming.

Certainly, businesses can hire independent contractors, but be willing to prove a few factors before you grant that status. First, does the contractor get all his income from just your company, or can he demonstrate other sources? Does the contractor take direction from the employer, or does he perform agreed upon work under his own direction. Does the consultant set his own hours, (a sure red flag for the IRS)? Does the contractor’s own IRS form show other income streams? The correct answers are obvious, but it’s vital to gather verification for each ahead of tax time.

Whistleblower harassment. The whistleblower who has made a verifiable complaint had best become a kid glove employee for the owner’s sake.

If he can prove he is being shunned or placed in an intolerable work environment after his filing the grievance, the employer could face a suit even larger than the one instigated by the original complaint.

After a grievance, the burden automatically lands on the business owner to show that no retaliatory action is taken with impunity.

Wise employers will caution supervisors and involved parties that no discriminatory acts will be tolerated. Such warnings delivered orally and in writing go a long way towards protecting business owners against retaliation claims.

It is virtually implausible for even the most astute business owner to encompass the labyrinth of legal snares awaiting even his most innocent moves. As the cynic’s saying goes, “All of us are somehow breaking some law somewhere.”

But with a little forethought, employers can avoid the most common infractions. And as to the rest, the very best defense comes from developing a golden rule in treating one’s employees — folks are just less likely to bite a hand that shows a personal concern for their welfare.